Sell yourself
I met with an entrepreneur this week who is building a web service that tackles a very big problem. In his case, there are diverse customer needs. Every customer needs something slightly different. One of the big challenges will be to come up with a standardized set of requirements that best fits those needs. The other challenge is to satisfy them in an easy to use, compelling web service.
The entrepreneur himself has clear expertise in the space. He undersands the market pain because he lives it himself daily. What he lacks (like everyone who’s just starting out) is capital and resources.
When you’re tackling a big problem, you either raise lots of capital to pay for the time and bodies needed to solve it, you break the problem into smaller chunks and tackle a portion of it, or you give up. It was clear to me that this business was not investor ready. Raising lots of cash was not a possibility. He could have just tackled a portion of it, but I thought there was another way: selling himself.
Because of his expertise, and because of the complexity of the problem, my recommendation to him was to go into the market and sell himself with his product. i.e. offer a consulting service that is wrapped around his technology. This allows him to gather lots of customer feedback, refine his approach around a particular segment and get paid to build a better product and a company which he still owns 100% of.
Over time, he will likely end up with a very complete product that has been tested with real customers. He will also know who really needs this product. He can then continue down the technology enabled services path (i.e. consulting and product together) or transition to a product only company. At that time, he’d be in a much better position to raise whatever capital he needed.
So, consider this approach for your startup idea. Can you sell yourself along with your product as a way to bootsrap, do customer development and build a much stronger story for whenever you do choose to raise capital?
For sure. The angels I work with these days are doing deals that VCs used to see. They are getting A round traction at seed round pricing.
Agreed. Angels are still investing but they’re committing fewer dollars. The bar’s been raised. For a vast majority of investors, a working demo and market validation are minimum requirements.
Thanks Seak. Good luck with your project!
Nice post and I have to say I agree with the approach of selling yourself with the product. Tackling a really big problem really does put you in a tight spot – not enough capital to build it, not enough people on your team to commit to actual building/research, hard to raise capital, and hard to push for revenue since it will take a while to get a "good enough" product. My start-up idea happens to be one of these big ideas, but I think my stage is even earlier than the person mentioned. I already have my potential customers interested so I'm tackling the issue by both starting to build product pieces and build myself to sell with the product
Angel investment just won't cover what he needs to do to build the right product. Also, they will want a working version and customers who want it. He can't get there. I can't share the details, but this is a longstanding problem. In my view, he's trying to do too much. But selling the product with himself will give him the feedback he needs to create the right stand alone product.
Great article and advice to new start-ups. At the same time the question here is why can't he go find angel investors? If he waits too long isn't someone going to beat him to the market?
In my experience, its far easier (though not actually "easy" to get early adopter customers who will tolerate new stuff than to get investors
I was in a similar situation and I discovered It's harder to find the right commercial partner than an investor.